Collision Liability. Around the middle of the 19th century, hull underwriters decided to extend the hull and machinery policy to embrace legal liabilities incurred by the assured in consequence of collision between the insured ship and any other ship or vessel. Liabilities resulting from contract with anything other than another ship or vessel were excluded from the cover, as were loss of life or personal injury.
This was an important extension because claims under the Running Down Clause (as the collision clause was known) were in addition to any other claim under the policy. This fact caused much dissent in the London market, and many underwriters objected to the extension. To placate the dissenters, the Running Down Clause limited cover to 3/4ths of the liability, with a further limit of 3/4ths of the insured value in the policy. The idea was that the assured would be more careful if he had to bear part of the liability himself. In practice, however, shipowners got round this problem by protecting themselves in mutual clubs for the other 1/4th. These protecting clubs eventually provided indemnity for a range of, otherwise, uninsurable risks (becoming the P. & I. Clubs of today).
Often indemnity by hull insurers covers the ship’s proportion of general average and salvage charges and the insurer can also pay for reasonable charges for measures taken by the assured shipowners, their servants and agents to avert or minimise a loss recoverable under the Hull clauses. These are called “Sue and Labour” expenses. There are other expenses and amounts of compensation which the assured may claim from the insurer, e.g., for certain treatment of a ship’s bottom damaged by an insured peril; for certain disbursements (such as managers’ commissions, increased values of hull and machinery, freight, anticipated freight, lost hire when a time charter~ and premiums for insurance) and also some return of premium for lay up and cancellation, or termination of the insurance contract.